While I hope rates go down again because I own several properties, I am thinking this may very well be the bottom and rates may never be this low again.
There is always a possibility that the fed could lower rates again but it is very unlikely.
As always I only recommend and fund loans for clients that are 30 year fixed rate loans. Never go for an adjustable rate mortgage!
I selected an adjustable rate several years ago (for the first and LAST time) and was locked in for 2 years at 5.85%. The property was rented.
So for 2 years I was making $ 500 a month net profit because my refinance lowered my payment several hundred dollars.
To make a long story short after 2 years the lender jacked my rate 1.5%. Then 6 months later they jacked me another 1.5%.
And every 6 months another 1.5% was added to my interest rate. Needless to say, when the rate goes up the payment goes up.
So after several years, I was losing money on the house as the rent was not enough to cover the mortgage, taxes and insurance.
My adjustable rate mortgage had a 12% or so cap. However the difference in payment on a loan at 5.85% and 12.85% is HUGE.
As a result, since I was making good money for the first 2.5 years, I never raised the rent. When I got hit with my 3rd 1.5% increase
I decided I had to raise the rent. I tried to raise the rent like $ 200 a month. This was a bad idea as the tenant said OK we are moving then.
Instead of calling their bluff, I changed the rent to a modest increase of $ 50. So I was still losing $ every month on the house.
I decided if I was going to be losing $ every month, it was time to refinance. Obviously I took a 30 year fixed rate. But since the house was no longer owner occupied it was about a 1% hit to the rate. My credit score went down due to poor credit utilization (maxxed out credit cards).
Sadly I couldn't get any better rate since rates had been going up for years and prime was now at 8.25.
My score was 619 UGH! I qualified for a higher rate than I was already paying on my adjustable rate mortgage, OUCH!
The 619 hurt me real bad compared to what a 620 would have gotten me. So I decided if I was going to be losing money on the house every month,
That I would get CASH out on my refinance. I ended up with a 12.25% rate. Another hit to the rate was taken for taking cash out.
I took out about $ 35K and paid off all sorts of credit cards thus lowering my credit utilization%, thus raising my credit score.
I will never get another adjustable rate mortgage as long as I live. And I will strongly recommend anyone getting a mortgage from me stay away from adjustable rate mortgages. So here I sit getting ready to refinance again next month.
Mortgage refinancing has become a way of life for me. I can't count the number of properties I have refinanced over the years.
I help a small handful of homeowners every month refinance their mortgages and get CASH out, reduce their payments and reduce their interest rates.
Rates now on 30 year fixed rate mortgages are in the 5% range for the best credit. 5% is awesome and in fact the US dollar loses more than 5% a year in value.
So while the lender thinks they are making money at 5%, they are really losing because in 20 years the dollar will be worth nothing, after losing 5% a year for 20 years. And in 20 years I will be paying them back with dollars which are going to be like pennies.
In the end it is all about the here and NOW, and the Payment. You can either make the payment or you can't. So focusing on the loan amount, the interest and the term of the loan is less important than getting a payment you can afford to pay and afford to pay on time each and every month.
The worst thing you can do to lower your credit score and make it hard to get mortgages in the future is to pay your mortgages late.
I deal with 100's of banks and quite frankly over 90% of them could care less if you pay those old unpaid medical bills. While unpaid bills kill your credit score,
Nothing kills your credit score more than habitually paying your mortgage 30 days late or more. And often a mortgage lenders underwriting guidelines
are structured, rate wise, around the number of mortgage lates, the more late the lower your score goes and the less of a chance you will have to qualify to refinance. If you have 60 and 90 day mortgage lates, you may as well forget refinancing because if somehow your credit score stays high enough, you wont be able to refinance because why would the lender want to loan you money if you are habitually late on your mortgage .